Step by Step: Guide to Buying from Alibaba Suppliers

This will be a full-on product sourcing guide with message templates and a new strategy for calculating which supplier is best.

But before we embark, remember these 3 sourcing principles…

(1) It’s a numbers game. More quotes = more information = better decisions.
(2) Don’t be afraid to walk away. As the buyer, you hold all the cards.
(3) Compile your data. Seeing supplier quotes side-by-side can help you reach a quick conclusion. We’ll show you how to do this later on.

So let’s take action [edit: shout out to Scott for inspiring so many to action], get quotes, and find our new best-seller!

There are 2 ways to get quotes on Alibaba: Buying Requests and direct messaging (we’re talking about Alibaba today, but these ideas apply everywhere).

Post a Buying Request first. It helps you articulate what you’re looking for and starts working on your behalf while you actively message suppliers.

POST A BUYING REQUEST

Alibaba.com has a big blue button on its homepage that says “Get Quotations Now”. Ok.

“Get Quotations Now” takes us to the Buying Request form.

Product Name: stuff the “Product Name” section with keywords like it’s Amazon in 2012. It helps suppliers find the request. Jump into the Google Keyword Planner tool if you need more ways to refer to your product.

Quantity: if you don’t know the cost per unit, it’s hard to say. You don’t want to set expectations too high, and you don’t want them to pass you by. “500” usually garners ample replies.

Details: when sourcing, never portray yourself as the final decision maker (e.g. CEO, President, Founder). Be a Buyer, Purchasing Director, VP of Product Development. Why? It removes the awkwardness of negotiation. Since you’re an employee, you must adhere to a budget. You have no choice. You must have the product specs a certain way. You have no choice. If they’re not talking with the sole decision maker, they can’t control some variables. That plays to your advantage. It also gives you more time to decide (“let me consult with the department”).

Upload Photos: upload many photos for reference. If you product doesn’t exist yet, graft a few different images together. Nothing fancy, but be sure to convey the idea.

Here’s a Buying Request template to save you some time:

Hello! This is [name] from the [company] Buying Department.

I’m interested in buying an initial order of [product]. If you can manufacture them, please send me an email:

[email address]
[note: you can’t actually include emails in the request, so write something like name [at] domain [dot] com]

In your email, please include:

(1) PICTURES: a detailed set of pictures of your product
(2) PRODUCT: what is your preferred price per unit/set?
(3) MOQ: what is your preferred minimum order quantity?
(4) [SPECIAL MODIFICATION]: what is the price of [custom change you want to make to the product]?
(5) AIR SHIPPING: what’s the shipping cost to the USA by express courier (e.g. UPS, DHL, FedEx)?”

Why is this template the way it is?

Use email. Ask them to email you instead of chatting on Alibaba. Why? To get their email address and to start screening suppliers. If you ask for an email and they only send you a message on the platform, they didn’t follow instructions. That’s not an immediate “no”, but be wary.

Numbered questions. School systems condition people to answer a list of numbered questions in their entirety. Unnumbered or long-winded messages invite unfinished responses, and drag out the conversation. We capitalize the main idea for each point for simplicity.

Say “preferred”. Say “preferred price” and “preferred MOQ” instead of just “price” and “MOQ” in case it’s high and you need to negotiate it. By being framed as “preferred” they are less fixed payments and more fluid figures. This tip alone saves you thousands of dollars in the long run.

Air ship. If your product is small and light, air shipping is fine. If it’s heavier and larger, you might consider the sea shipping/freight forwarding combo. If it’s done by express (UPS, DHL, FedEx), then they’ll clear customs for you, and you don’t need a freight forwarder.

Now, post the request. As you wait for replies to roll in, search your product on Alibaba and scroll for gold.

SEND DIRECT MESSAGES

How do you guarantee replies? Write to suppliers with a history of replying. Foolproof.

On the right side of the screen, you’ll see a supplier’s Response Rate. Also, Alibaba Trade Assurance now shows sales numbers. Generally, suppliers with transactions are more trustworthy. Sellers without transactions may also be great, though. Don’t rule them out.

A pink collar has 2 transactions worth $10,000 and a response time over 72 hours. That’s a slow time, but the sales add legitimacy. “Yes” to a message. Why not, right?

Another blue flea collar has no Trade Assurance sales and a 72 hour response time. I’d be less inclined to send a message.

The third. I’d be very inclined to message these guys. Great sales, great response time, great photo. 100% “Yes”.

Let’s save you some more time. When you find a supplier that you like, use this template. It’s similar to the Buying Request, but this time we can include our email address:

Hello! This is [name] from the [company] Buying Department.

I’m interested in buying an initial order of [product]. If you can manufacture them, please send me an email:

[email address]

In your email, please include:

(1) PICTURES: a detailed set of pictures of your product
(2) PRODUCT: what is your preferred price per unit/set?
(3) MOQ: what is your preferred minimum order quantity?
(4) [SPECIAL MODIFICATION]: what is the price of [custom change you want to make to the product]?
(5) AIR SHIPPING: what’s the shipping cost to the USA by express courier (e.g. UPS, DHL, FedEx)?”

Look forward to hearing from you,

[Name]
[Buying Department, Company]

And when you’re sending them a message, change the subject line. There will be a template line in there… but don’t use it!

Use something short; “Order of [Product]” or “I’m interested in [Product]”, or even type the supplier’s first name in it. It stands out in their inbox and gets a reply before the mass of other private labelers. It’s best to send messages at the beginning of the Chinese business day. For California, 6pm UTC. For New York, 9pm EST.

The good: some suppliers will send you an email (not an Alibaba message) answering each of the 5 questions point-for-point are shoe-ins. Treat them well. Tell them you appreciate the prompt response.

The not-as-good: some suppliers will send you an Alibaba message with a generic email response, or will ask how they can help. Don’t discard them yet. This phase is all about getting as much information as possible. Simply re-send the original email or engage them on the platform.

The bad: some suppliers won’t respond, or will respond days later. Maybe they were at a trade show? Don’t discard yet.

ORGANIZE THE RESPONSES

We need a place to organize everything. A home base.

The goal is to get a lot of different quotes. An average will emerge. That way, it’s easy to compare and find red flags. You don’t want red flags.

Unless you’re private labelling red flags.

Anyways, crack open a fresh spreadsheet and let’s get going.

Make an Excel doc with 11 different columns. PCs can press Alt+Tab to flash back and forth from this window to your Excel. Mac users can press Command+ Tab. It’s a nifty little trick.

Here’s what to enter in each of the cells:

A1: Name of the supplier
B1: Email of the supplier (you’ll have this if you don’t go through Alibaba; and even if you do go through Alibaba, it may be on the supplier’s profile)
C1: Website of the supplier (either web or en.alibaba site)
D1: MOQ of the product, or the quantity you’re looking to order
E1: CPU (cost per unit of the product)
F1: Sample fee of the product (normally, this isn’t in the first template as to prevent confusion, so sort this out later)
G1: Product cost
H1: Shipping fee (the Air Shipping cost to your place, or Amazon warehouse)
I1: TOTAL
J1: Price per unit
K1: Notes (your personal impression of the communication as a whole)

Now, add these 3 formulas in the 2nd row:

G2: click the G2 cell and then write this formula: =D2*E2. MOQ multiplied by Cost per Unit = your product cost.
G1
I2: click the I2 cell and then write this formula: =G2+H2. This adds the Product Cost and Shipping Fee together for our grand total.
Source the Perfect Product for Amazon

J2: click the J2 cell and then write this formula: =I2/D2. This divides the total cost paid for product and shipping by the number of units you’ll be getting— your true price per unit, with everything accounted for (except for things you need to pay for when the inventory hits Amazon like Amazon’s referral and storage fees, PPC, duties etc.). More on that another time.

We’re done!

Congratulations, you now own a universal sourcing template. This makes life SO much easier. Now, you can punch supplier quotes into the spreadsheet and see the total instantly. A lot of sourcing is about how the suppliers’ data sets compare to eachother. Feel free to add or subtract columns from this sheet. You may need to account for more costs than shown here.

But, numbers are only half the equation.

Now that we’ve got the technical side down, it’s time to learn how to spot a good supplier using street smarts.

A GOOD SUPPLIER…

Is a manufacturer, not a re-seller.

You may have noticed that the exact same product is offered by different sellers on Alibaba. How can this be? Re-sellers. They (through no fault of their own) need to make money on the re-sale, so they’ll charge a mark-up. Every dollar cuts into your profit, and ends up costing thousands in the long run. Here’s how to screen out re-sellers:

PHOTOS. Ask for factory and facility photos.

EMAILS. Emails like “sales2@companyname.com” indicate a factory as opposed to “nancy@companyname.com”. Not always true, but you should be talking to a member of a dedicated sales department, not a 1-person production. Once you get a good prospect, move to Skype or WhatsApp for faster chats.

TOUR. Tell them your sourcing agent in China is conducting facility tours this month, and would like to stop by (you don’t even need to follow through on this; just see how the supplier reacts). Or, you can do this for real.

SKYPE. Ask them to video Skype you from the factory in an hour. Are they ready?

TRADE SHOWS. Upcoming trade show listings on their site and on Alibaba. If they are willing to appear in person, that’s a good sign.

DOCUMENTS. Does your supplier have source documents that only the original factory would have? These include quality control docs that vary by industry (CE, FDA, ISO9001, RoHS, MSDS reports, material test results, etc.) and Adobe Illustrator (.ai, .eps) or Photoshop (.psd) files for their packaging and instruction manuals.

BRANDING. Look at the version of the product everyone’s selling on Alibaba. Zoom in. Is there a visible brand or logo engraved anywhere? Search that brand name online, and you’ve found the original.

PRICING. When you’re comparing prices in the Excel doc, who has the highest prices? This may indicate who re-sells, since they need to make margin on the sale.

CUSTOMIZATION. Factories own the machinery used to make the product, so they can customize more easily than a re-seller can. If you ask a supplier to make a custom physical change and they can’t, is it because their machinery can’t do it? Or, is it because they don’t have any machines to begin with?

PRODUCT LINE. Re-sellers often offer expansive lines of materially different products. Ask yourself: does it make sense for these items to be manufactured in the same factory? If a supplier sells flea collars but also selfie sticks, they’re a re-seller. True factories have breadth in a small area of expertise.

For example, here’s the collar supplier who was a definite “yes” earlier. As you can see, they’re all about paracord stuff. That’s all they do.

Plus, they can offer footage from the factory floor. Another good sign.
Source the Perfect Product for Amazon

Anyways, where were we? Right. A good supplier…

Is thorough.
– INSTRUCTIONS. Use instructions to screen. Professional reps read your instructions and follow them. For example, if you’re chatting on Alibaba and ask them to email you instead and include their company website, pay attention to who follows the instructions and who doesn’t. Pay attention to who answers the 5 sourcing questions point-for-point. Those suppliers are trying hard and deserve your attention.
– PAYMENT. Good suppliers connect with payment methods like PayPal and Alibaba Trade Assurance. These 2 methods in particular have some hoops and fees on their end, so it’s a good trust indicator. However, good suppliers may not have Trade Assurance set-up yet and prefer T/T wire transfers, so it’s not a hard-and-fast rule. You can pay for order #1 via PayPal or Trade Assurance, then move to wire transfers once you’ve confirmed the quality.

Doesn’t need good English or a good website.
Factories are notoriously bad at marketing. Don’t discard a supplier based on their English or the look of their site. More important than perfect English is their attention to detail, the effort they make to answer your questions, and the area of expertise of the factory.

Can supply you with a product line.
Source with the future in mind. Does the supplier you’re considering have an extensive line of products in the same area? In the case of the paracord supplier, order #1 is a flea collar. Once that does well, you can buy collars for cats, paracord leashes, paracord chewtoys, etc. Finding a good supplier the first time saves from having to do this process over again.

NEGOTIATIONS

Tips to come to win-win agreements with suppliers:

THE ‘HOLD THE BOX’ TRICK. You’re building a brand and want a custom box. Some suppliers may have an MOQ of 500 products, but and MOQ of 1000 custom boxes (because their packaging guy set an MOQ on it). 1000 boxes means you need to make 1000 units, right? No. Make 1000 boxes, ask them to hold 500 with them in China for your next order, and make 500 units as planned. They meet their packaging minimums, and you order the right amount.

THE SAMPLE REFUND. Pay for samples with PayPal, and ask if the amount can be refunded if you end up placing a mass order. Affirm that they won’t lose any money in the process, and that it will incentivize the Buying Department to go through with the order. You get your sample payment back, and they get more business.

THE ‘LONG TERM’ APPEAL. If you can’t seem to agree on the price, appeal to future orders. “It may seem that this order is worth only $3000,” you say, “but we’re a growing company, and a successful order today may lead to easy repeat business for you: $5000, 10,000, $20,000. What’s the best price that you can offer me?” You get lower prices, and they win a long-term partner.

DON’T SAY ANYTHING. If you stay quiet for a few days, they will follow up. After a few messages, they’ll be more receptive to lower prices. In the end, you are the buyer and hold all the cards. The best negotiation tactic is being willing to walk away from the deal.

PRAISE. If someone does something we don’t like, we tell them. If someone does something good, we say nothing. Break the trend. Praise sales reps for following up, fast responses, good product certifications, quality, service. When negotiations hit, you’ll be glad you’ve set a friendly tone.

HAVE A BUDGET. Set a definitive amount you’d like to spend on the order, and stick to it. With MOQs, modifications, packaging, and shipping, it can be easy to exceed your budget. If anything, share your budget with your supplier and ask how you can work together to make it fit.

SAMPLING

You’ve found suppliers, compiled their information, and negotiated the price of the mass order. Now, you need a sample unit to test the quality. Going into a mass order without a sample is… risky. Always sample.

Here’s the anatomy of a sample order:

sampling fee = the fee for the product. It’s free, unless you make a custom sample.

shipping fee = most likely by air (DHL, UPS, FedEx), and will comprise a good chunk of the sample fee

How much should you pay? Expect anything from $30-$200, depending on the complexity of your product.

PAYMENT

For the sample, use PayPal. It’s instant and favors the buyer, in the event that something isn’t right with the sample.

For the mass order, you’ve got options!

Western Union: don’t. If a supplier only takes Western Union, don’t deal with them. No buyer protection; once the money’s gone it’s gone. Takes 3-5 days.

PayPal: you can, but the fees on the receiving end are high, so most suppliers will be against it. You can offer to split the PayPal fees for order #1, and think of it as a sort of “insurance policy” on the first purchase. Instant.

T/T Wire Transfer: the payment method of choice for most suppliers. It’s done from bank to bank, and is fairly reliable. But like Western Union, there’s no buyer protection. Takes 3-5 days.

Alibaba Trade Assurance: Alibaba’s escrow service. All payments are based on an online contract. The money is sent to an Alibaba-owned account, and then transferred to the seller. Some buyer protection, and has the send reliability of a wire transfer. Takes 3-5 days.

Or, do a hybrid. Use PayPal or Alibaba Trade Assurance for your first order to get the protection, and then switch to wire transfers after a successful first batch.

THE NEXT STEP

There you go!

In this article, we:
– took our idea
– sourced it on Alibaba using a Buying Request and direct messaging
– collected and analysed the pricing in a spreadsheet
– separated re-sellers from factories
– negotiated win-wins
– sampled
– paid for the mass order.